On Thursday, Asian markets reversed yesterday’s losses with Nikkei taking the lead in the region. Investors seemed hesitant to buy a large chunk of shares owing to the ongoing uncertain environment around the globe. Oil prices also recovered from yesterday’s lows on drawdown of inventory in the US.
Oil prices found an overnight support from stronger-than-expected decline in the stockpile of the world’s largest consumer. WTI futures with September delivery surged 0.54% to $41.05 per barrel, while global benchmark Brent futures with October delivery fell 0.14% to $43.16 a barrel, as of 9:40 AM EDT.
Overnight, the US Energy Information Administration (EIA) reported a drop of 3.26 million barrels in gasoline inventory against market expectation of 200,000 barrels decline. However crude inventory saw a surprise rise of 1.4 million barrels last week, says EIA.
The report drew mixed emotion among market participants, with speculators taking profit on overnight rally. According to analysts, the inventory report has once again indicated toward rising crude inventory, which adds to the glut.
Despite the upbeat gasoline data, most of the analysts are still bearish over oil outlook as summer-driving season has come to an end. Many market participants believe that oil may bounce back to the below $30 per barrel mark in near term. In the past few weeks, hedge fund managers have also taken short position in oil futures due to weak market fundamentals.
Two months earlier, oil prices rallied to greater than $50 per barrel on tight supply. Supply outages in Canada and Nigeria supported the prices. However, most of the supply-related factors have now been resolved, flooding market with oil.
During Asian trading hours, traders seemed confused and cashed-in overnight rally, adding to the volatility to the prices. Analysts believe that oil market is likely to remain under pressure, as traders have turned bearish due to glut in the market.
Overnight, dollar regained momentum despite weaker-than-expected US job employment data. Bloomberg dollar spot index surged 0.15% to 95.702, as of 10:10 AM EDT.
Last month, employers cut 45,346 jobs, showing a reduction of 19% from June, Challenger, Gray & Christmas reports. In an official statement, Challenger CEO John A. Challenger said: “We did see resurgence in energy-sector job cuts. This was somewhat unexpected in light of recent projections of increased oil prices and possible labor shortages in the industry.”
The dollar came under pressure following the implementation of weak economic indicators. This weighed on the investors’ hopes of a rate hike as soon as in September, hinted by Fed in its latest policy statement.
However, some analysts have reasons to believe that dollar is likely to continue fluctuate as economic fundamentals are weak. Market bulls are looking for positive factors to remain in bullish territory, but they cannot hold it long.
Today, Japanese shares reversed yesterday’s loss on the back of relatively weaken yen. Nikkei 225 added 172 points on the back of the rally in material and consumer discretionary sector, finishing 1.07% higher to lead the region. The index started off strong but in afternoon fell to negative territory, dragged by energy and telecommunication sector.
In the currency market, yen strengthened to 101.05 per dollar, trading flat, as of 10:16 AM EDT. Major exporters finished lower on the back of relative weak yen with Honda Motor Co Ltd surging 2.08%, Toyota Motor Corp surging 1.83% and Sony Corp adding 0.34%.
Oil shares traded mixed due to weak oil prices with Showa Shell Sekiyu KK falling 6.92%, while Inpex Corp added 2.92%, sending energy sub-sector 3.78% lower.
Mainland stocks reversed early losses to close at strong note as supported by technology and telecommunication sector. Shanghai stock exchange composite added 4 points to finish up 0.13% despite opening and trading on weak note most of the time. CSI 300 index also added 8 points to close up 0.24%.
According to analysts, most of the investors were at sidelines owing to the weak economic outlook. Speculators seemed to buy stock to cash in the rally. Overall, economic fundamentals of the economy are weak, which added to volatile sessions.
In the currency market, People’s Bank of China lowered yuan daily fixing to 6.6409 per dollar, showing a cut of 249 basis points as a response to strengthen in dollar. Despite, devaluing the currency, renminbi traded up both in onshore and offshore market as investors were betting on stronger yuan.
Energy sector gained 0.24% despite mix oil prices with Sinopec Oilfield Service Corp closing up 0.26%, China Petroleum & Chemical Corp adding 0.21% and PetroChina Company Limited edging up 0.14%.
Stock markets in the country started off strong as investors calmed down, following the surprise cut in interest rates earlier this week. S&P/ASX 200 added 10 points on the back of rally in energy and consumer staples sector to close up 0.18%.
Miners also traded mixed with Rio Tinto Limited falling 1.62%, while BHP Billiton Limited surging 1.15%. Among oil stocks, Santos Ltd finished 6.74% higher, while Woodside Petroleum Limited closed up 0.72%, sending energy sector 2% higher.
Hang Seng crawled back on yesterday’s losses as rally in energy and industrial sector supported the index to add 93 points. The benchmark opened on a strong note and maintained the ground to finish up 0.43%. Energy sector finished up 1.21% as Cnooc Ltd soared 3.05% and PetroChina Company Limited added 0.38%.
Overnight, the US equity market also reversed yesterday’s losses and finished on strong note as rally in energy, financials and technology sector supported the buying pressure. NASDAQ took the lead and closed 0.43% higher, followed by S&P 500, which surged 0.31%. Dow Jones Industrial Average added 41 points to edge up 0.23%.